By now, everyone knows the world's largest oil facility at Abqaiq in Saudi Arabia was damaged by a drone and Cruise missile attack. The Saudi's second-largest oilfield, Khurais, was also attacked and damaged. The oil markets responded by sending the price of Brent crude over $70/barrel and W.T.I. over $65/barrel. This knee-jerk reaction didn't last long and the price of Brent and W.T.I. declined the following day. At the time of this post, W.T.I. is at $58.79 per barrel and Brent is $64.93 per barrel.
Before the attack, there was little or no margin built into the price of oil to allow for chaotic global disruption. This past weekend's drone and Cruise missile attack have changed all that. The new floor for W.T.I. is $58 per barrel and $64 per barrel for Brent. Traders going below this floor should do so with caution.
So how has the attack impacted production?
1) 5.7 million barrels of production per day was taken offline
2) 2.0 million barrels of production per day has been restored
The Saudis are working diligently to restore the remaining 3.7 million barrels of production and believe they can do so by November. For the week ending September 27, the almost 30 million barrel shortfall will likely go unnoticed because the Saudis will draw down their storage to fulfill their contracts. Barring further chaotic events, the shortfall for the week will likely go unnoticed.
MY PREDICTION:
The price of oil will rise, but not by much. Closing price on September 27 -
W.T.I. - $61.23
Brent - $68.75
This is just a prediction
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